Mining is productivity leader despite labour rise: RBA’s Edwards

The mining sector remains the most productive sector of the Australian economy despite a “collapse’’ in the past decade, Reserve Bank of Australia board member
John Edwards
says.

“[Mining] has the very highest level of labour productivity . . . because it’s very capital intensive. Although you account for about 8 per cent of gross domestic product it’s only about 2 per cent of employment," the economist told miners on Wednesday.

At an Australian Mines and Metals Association event in Perth, Dr Edwards said mining productivity was helping prop up national figures.

“Although productivity in the mining industry has collapsed, mining actually continues to make a positive contribution to overall productivity growth in Australia," he said.

“The reason for this paradox is this: because the level of productivity in mining is so much higher than the average, the fact that you have doubled your workforce means you have dragged up the average level of productivity in the economy, even though the specific level of productivity in mining has fallen," Dr Edwards said.

He said mining was vulnerable to union pressure but the main reason productivity had dropped 30 per cent in the past decade was the workforce had grown more quickly than the amount of minerals it produced.

The resources sector can become top heavy in capital investment and employment because of the long time it takes to build projects and the workforce needed for construction.

The mining industry has insisted a concerted union push for better wages and conditions has had a dramatic impact on productivity in the sector. An AMMA spokeswoman said multiple factors had resulted in falling productivity.